Ujji­van Ex­pects Mod­est Growth on Way to Be­com­ing a Small Bank

The Economic Times - - Smart -

Mum­bai: Ben­galuru-based mi­cro fi­nance in­sti­tu­tion Ujji­van Fi­nan­cial Ser­vices, which will hit the pri­mary mar­ket on April 28 with a ₹ 900-crore IPO, ex­pects mod­er­ate growth in the next cou­ple of years as it tran­si­tions into a small fi­nance bank.

“The RBI has told us for the first two years that we can have a mod­er­ate growth be­cause fo­cus should be more on man­ag­ing the tran­si­tion very care­fully be­cause the na­ture of busi­ness is chang­ing com­pletely,” Samit Ghosh, MD, Ujji­van told ET. The com­pany will be fo­cus­ing on grow­ing its in­di­vid­ual loan port­fo­lios, mainly the mi­cro SME fund­ing and the hous­ing seg­ment. Ghosh said that Ujji­van would de­ter from com­pet­ing with re­tail banks and fo- cus more on the un­served and un­der­served clien­tele.

“The re­tail li­a­bil­i­ties are go­ing to be new,” Ghosh said. “The sec­ond thing is we have a very wide net­work of branches that will give us a foot­print on which we can do re­mit­tances and third-party in­surance prod­ucts.”

Ujji­van will have a mas­sive chal­lenge to in­crease its geo­graph­i­cal foot­print in un­banked ar­eas. As per RBI’s reg­u­la­tions, 25% of small fi­nance bank branches have to be in un­banked ar­eas. At present, the com­pany does not have a sin­gle un­banked ru­ral branch.

“It’s not that we will con­vert all the 470 branches to the bank branch im­me­di­ately,” Ghosh said. “We will do it in a phased man­ner, but un­banked ru­ral is go­ing to be a sig­nif­i­cant num­ber.”

Ghosh also said that small fi­nance banks with a proven track record will be more suc­cess­ful than pay­ment banks.

“For a small fi­nance bank, it is not a startup sit­u­a­tion, so the chances of such banks suc­ceed­ing are much higher com­pared to a pay­ment bank which is start­ing from scratch,” Ghosh said. “Star­tups nor­mally have a higher mor­tal­ity rate.”

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